Landed costs

Landed cost within Brightpearl is the total cost of a landed shipment including purchase price, freight, insurance, custom duties and other costs up to the port of destination.

Landed costs are the costs associated with importing goods, but not the cost of actually buying the goods from the supplier.

Examples of landed costs are:

Hiring a shipping container

The cost of travelling the container by land, air or sea

Insuring the goods during transit

Duties payable to get the goods into the destination country

Taxes payable when bringing the goods into the destination country

When to allocate landed costs

The Brightpearl landed costs feature makes accounting for these costs at the right time really easy, but it also provides more accurate profit analysis on your sales - even down to an individual item. To ensure these figures are reported on your sales detail the information needs to be there at the time the item is sold, and this means ensuring landed costs are allocated to your stock before that happens. If you have fast moving stock you may not know your exact landed cost figure until it is too late and the items have been received into stock and shipped out for a sale - it is therefore better to estimate your landed cost and allocate it to items before they are sold (marked as shipped on a sale) than to wait until you have the actual cost and potentially miss out on more accurate profit analysis per item. Then, once you do know your actual landed cost you will be able to make all the necessary adjustments to ensure the accounting is all correct.

Allocating landed costs to inventory

Brightpearl provides the following methods of apportioning a landed cost across items on a purchase order:

Value

This method will use the price on the purchase order. Apportioning based on value might be chosen for costs such as insurance, since more valuable items in a shipment are likely to cost more to insure, therefore allocating more of the cost to those items may give a more realistic distribution.

Quantity

This method will use the quantity on the purchase order to calculate how much of the landed cost should be allocated to the purchase order row. Each individual item will ultimately by allocated the same landed cost.

Volume

This method will use the dimensions and volume recorded the product record of each item. Apportioning based on volume might be chosen for costs such as space on a shipping container, since larger items in a shipment are likely to cost more to transport, allocating more of the cost to those items may give a more realistic distribution.

Weight

This method will use the weight recorded on the product record of each item. Apportioning based on weight might be chosen for costs such as freight which is charged on weight, since heavier items in the truck are likely to cost more to be delivered, allocating more of the cost to those items may give a more realistic distribution.

When allocating a landed cost in Brightpearl, select the method of distribution you want to use for that particular cost.

How to allocate landed costs

Landed costs can be allocated to items on purchases. This can be done before or after receiving the items into stock, but they must still be in stock. If any of the items on the row have already been sold then the row will not be displayed.

Access the landed cost process in one of the following ways:

Open the purchase order, click the arrow on the side of the save changes button and select Allocate landed costs

Go to Purchases > Allocate landed costs and then use the filters to search for the relevant purchase order rows

Note that drop-ship purchases and partially sold batches of items will not be displayed.

Select all the purchase order rows against which the landed cost is to be allocated and click the Allocate Landed Costs button.

In the pop-up window complete the details of the landed cost:

Distribute by: Specify how to distribute this landed cost across the items. When using weight or volume the product records must have these details.

Account code: This is the account used for the accounting for landed costs. The default code is set at Settings > Company > Accounting: Nominal codes/Account codes. Ask your accountant if you have other codes for different types of landed costs.

Currency: Specify the currency of this landed cost.

Exchange rate: The system exchange rate is picked up automatically once the currency is selected, but it can be changed.

Payable to: Select the supplier of this landed cost. This can be the same or different from the purchase orders. Ensure it is the company who will be paid for this landed cost.

Reference: Enter a unique reference, such as the shipping container, to make searching and reconciling these landed costs easier later.

Amount: Enter the full landed cost charge in the currency chosen above.

The landed cost preview screen is displayed informing you of how the costs have been distributed and how they will affect the item values. Nothing has happened at this stage. This is simply a preview to double check before affecting your stock.

Click the Allocate button to distribute the cost across the items on the selected purchase order rows. You will get the opportunity to review the details before committing them.

Click Confirm to complete the process and commit the uplifted cost to the items.

You will be returned to your originally selected items so that you can land more costs if needed. If you choose to Cancel you will be warned that your allocations will be lost if you continue. If you continue you will be returned back to your selected items to start again.

Note: If you try to simply navigate away from the page before cancelling or confirming you will be warned that your changes will be lost and you will have to start over by filtering and selecting your items.

Receiving the landed cost invoice

Landed cost invoices will need to be entered into Brightpearl to update the supplier/vendor account balance and the accounting.

A landed cost may be included on the same invoice as the products, or it may be a separate invoice. Depending on which, the invoice will be entered either via the original purchase order or as a bill.

When posting an invoice for a landed cost, it is important that the same account code and reference is used so that it is possible for the accounting to be reconciled.

How to enter a landed cost invoice / bill

A landed cost may be included on the same invoice as the products, or it may be a separate invoice. Depending on which, the invoice will be entered either via the original purchase order or as a bill.

Where the landed cost is included on the purchase order and purchase invoice for the goods:

This means that the landed cost is added as a row on the purchase order. Ensure that this row is assigned the same account code as the landed cost. It can be checked on the landed cost report.

Where the landed cost is not on the purchase order and is on a separate invoice, the charge should be entered as a bill:

Go to Suppliers / Vendors > Enter a Bill .

Select the same supplier/vendor as assigned to the landed cost.

Enter the landed cost reference in the details. This is important so that reconciliation of the landed cost can be done. The landed cost reference can be found from the Landed Cost Report.

Select the same landed cost account code as was used for the landed cost. This is important so that the reconciliation of the landed cost can be done. The account code can be checked on the Landed Cost Report.

Click the Enter Bill button to post the invoice.

Reporting on landed costs

There are several places in Brightpearl where landed costs can be seen and reported:

Inventory detail

Inventory audit trail

Goods-in for a PO

Landed costs report

Inventory detail report

This is where all in stock items can be viewed at their current value, inclusive of landed costs.

A user without the landed cost permission will be able to see only the total value.

Inventory audit trail

The audit trail will display the current value of the items. If landed costs are later allocated the value will be updated to include those costs.

Goods-in screen

The goods-in screen (when receiving inventory on a purchase order) indicates the original value of the items, the landed costs for those items and the total value of the items going into stock.

Landed costs report

The landed cost report provides a list of all allocated landed costs with details of the estimated and actual landed costs.

Click on the landed cost reference to view the landed cost per purchase order row

Click on the landed cost reference to display the accounting detail recorded for the landed cost

How to delete landed costs

Landed costs can only be deleted where no accounting entries have been made, this means that none of the stock has been received into stock.

Go to Purchases > Landed Costs Report.

Click Delete next to the landed cost.

Accounting for landed costs

Landed costs can be allocated to items on purchase orders before or after they have been received into stock, but they must still be in stock. All the accounting for landed costs will happen automatically and what journals are posted depends on whether landed costs is allocated before or after the goods have been received into stock.

Note that once items have been sold all of the inventory and cost of sales accounting has been posted in Brightpearl and therefore landed costs must be manually entered into the accounting.

Accounting for landed costs is generated at the following times:

When items with allocated landed costs are received into stock

A single journal is used to account for assets and landed costs.

When landed costs are allocated to items already in stock

A journal is created when the items are received into stock and an additional journal when the landed costs are allocated.

Additional accounting entries to be aware of when using landed costs are:

Cost of sales accounting (shipping journals)

These journals will use the item cost inclusive of landed costs

Landed cost invoice journals

These should be posted to the same account code as used when the landed costs were allocated.

Receiving goods into stock with landed costs

When inventory is received into stock an accounting journal is created to update stock assets and stock received not invoiced. Where landed costs had been allocated prior to receiving the goods, the items will immediately be received into stock at their uplifted value. In order to account for the landed costs, an additional row is added to the goods-in journal.

When receiving the goods in, it is possible to see the landed cost value by which the asset value will be uplifted:

Receiving the goods into stock automatically creates an accounting journal to account for inventory assets and landed costs. This means that the inventory asset value on your balance sheet is uplifted by the landed cost value:

Allocating landed costs to items already in stock

Where items have already been received into stock accounting entries will have already been made to increase inventory assets using the cost known at the time of receiving. If additional landed costs are then allocated the value of those items will be increased by posting an additional journal with the extra landed cost amount. This occurs at the point the landed costs are confirmed:

Original goods-in journal without any landed costs

Additional journal to uplift the items with landed costs

Cost of sales accounting with landed costs

When any item is sold and shipped the cost of sales accounting is automatically posted (if active). If landed costs have been assigned to the shipped items this is recognised in the accounting as the cost of sales and inventory values in the journal include the relevant landed cost amounts:

Reconciling landed costs

Landed costs should be reconciled regularly to ensure all the accounting balances. The aim of the reconciliation is to ensure the actual landed cost reported in Brightpearl is equal to the invoiced landed cost. The actual landed cost accounted for in Brightpearl can be seen on the landed cost report. Clicking on this figure will drill down to the general ledger to view all of the related accounting journals:

Any discrepancies between the actual and invoiced landed cost will need to be entered as a correction journal. Entering the correction journal using the landed cost reference will update the actual landed cost figure on the report.

Once you are happy that the accounting balances the landed cost can be marked as reconciled.

When to reconcile landed costs

A landed cost is ready to reconcile once all of the accounting has taken place, which is once the following have occurred:

All the inventory on the purchase order has been received into stock and therefore no more landed costs will be accounted for

The purchase invoices have been received for all the items and therefore no price corrections will be made to the purchased items

The landed cost invoice has been received and entered as a supplier bill

The landed cost report indicates when a landed cost is ready to be reconciled:

How to reconcile landed costs

Reconciliation of landed costs should be done once you have received the invoice for the landed costs.

Go to Purchases > Landed cost report .

Ensure that all the inventory has been received and the purchases invoices have been received. This indicates that all the accounting has been created and no further changes will occur.

Click on the Actual Landed Cost figure reported for the landed cost to view all the accounting entries.

Check to see if the debits and credits balance. If they do not balance you may wish to investigate the reasons for the discrepancies before making any adjustments.

Once you have identified the reason for any discrepancies corrections should be made by entering manual journals - ensuring that the landed cost reference is entered as the Invoice Ref on the journal, this reference is used to update the actual landed cost figrue on your report.

Once you are happy that the accounting balances, return to the landed costs report and mark the landed cost as reconciled.

Understanding estimated, actual & invoiced landed costs

There are three different landed cost figures to understand:

Estimated landed cost is the amount originally entered as the landed cost which was distributed across the purchase order items

Actual landed cost is the amount recorded in accounting, including any manual adjustments made

Invoiced landed cost is the true amount you have been invoiced for and must pay - the actual landed cost amount in Brightpearl must be brought inline with this figure

Understanding differences between estimated & actual landed cost

Differences between estimated and actual landed costs occur in Brightpearl for the following reasons:

Under/over receiving of goods

When landed costs are allocated it is calculated per unit, and every unit received will be uplifted by that amount. So if extra items are received or fewer items are received, then that unit cost will be posted more, or fewer, times than expected. For example, an order for 10 items costs £10 to ship, this works out at £1 per item landed cost. If 10 items are received then £10 landed costs are accounted for, but if only 9 turn up then only £9 landed costs are accounted for, or if 11 turn up the £11 landed costs are accounted for. So even though the landed cost estimate is for £10 what was actually posted to accounting can be different.

Landed costs are rounded per item

Brightpearl needs to round landed costs to create the accounting and this can lead to the actual landed costs not adding back up to the original estimate. For example, the following order details show how the estimated landed cost is distributed to each item and then how the accounting for each row is rounded to 2 decimal places, resulting in an overall discrepancy between estimated and actual landed cost of 0.01:

PO Row

SKU

Qty

Actual total landed cost of £300 distributed by qty = unit cost

Total landed cost accounted for = qty x unit cost

1

ITEM01

100

0.8571

85.71

1

ITEM02

100

0.8571

85.71

3

ITEM03

100

0.8571

85.71

4

ITEM04

50

0.8571

42.86

Total landed cost posted to accounting =

299.99

Understanding differences between actual & invoiced landed cost

Even if the estimated and actual landed cost in Brightpearl are equal, when the landed cost invoice is received you may identify differences which need to be accounted for. Ultimately, the actual landed cost figure in Brightpearl should be equal to the amount you are invoiced. You may identify differences for the following reasons:

Foreign currency landed costs & exchange rate differences

When landed costs are allocated in a foreign currency an exchange rate is used to convert it into your base currency before distributing it across the items. When the invoice for the landed costs arrives the exchange rate could be different, in which case the charge works out at a different amount than was accounted for. For example, $15 at an exchange rate of 1.5 works out at £10, if this is allocated to 10 items that’s £1 uplift each, if all 10 are received then £10 landed cost is accounted for. When the invoice arrives for $15 and the exchange rate is 1.6 that now becomes £9.38 landed costs.

Estimated landed cost

When landed costs are allocated it needs to be done early in the purchasing process so that the stock value is uplifted before they are sold. This means that estimated values may be used. For example, you order 10 items and estimate that you will be charged £10 landed costs, you receive all 10 items and therefore £10 landed costs is accounted for. However, when the landed cost invoice turns up you actually have to pay £12. This results in a £2 difference in the landed cost nominal code.

FAQs & troubleshooting landed costs

How do I activate landed costs on my account?

In order to prevent any discrepancies in your data, we require you to have consultancy from our Professional Services team before we activate Landed Costs on your account. Please note that the Landed Costs module is only included in some Brightpearl pricing plans.

If you would like to find out whether your plan includes Landed Costs, or to find out more about the consultancy involved, then please contact our Customer Success team at success@brightpearl.com.

Why am I not able to allocate landed costs to my items?

It is not possible to allocate landed costs to...

...non-stock tracked rows

Only stock tracked items will be listed. It is not possible to allocate landed costs to non-stock tracked items.

...sold items

If any of the received items have been sold then the row will not display and landed costs cannot be landed against the items. Landed costs for sold items will need to be manually entered as a journal directly to cost of sales. This includes part-sold line items. If you have sold any quantity of a line item, then you will not be able to allocate landed costs for that line item at all.

...drop-ship purchases

Drop-ship purchase order rows will not show up in the landed cost workflow so costs cannot be allocated to them.

...bundles

If a purchase order contains a bundle then only the bundle components (the stock tracked rows) will be available for allocating landed costs against. Remember that a bundle on a purchase works by receiving each component into stock separately at their own cost so it is these items which are allocated the landed costs.

Can I allocate landed costs to...

...partially received order rows?

Brightpearl will allow landed costs to be allocated to received or not received items, so partially received order rows are not a problem. The only difference will be seen in the accounting entries made.

...back orders?

Landed costs can be allocated to back orders. And if items are split to back order after allocating landed costs the cost will be split with it. If items with landed costs are split onto a back order they will then show up under the new order reference on the Landed Cost Report.

...warehouse transfers?

If the items have already been received and transferred to another warehouse the landed cost can still be allocated against the original purchase order row. The value of the items in each warehouse will be correctly updated. If items are transferred after landed costs have been allocated they will be transferred at their total value inclusive of those landed costs.

...bundles?

If a purchase order contains a bundle then only the bundle components (the stock tracked rows) will be available for allocating landed costs against. Remember that a bundle on a purchase works by receiving each component into stock separately at their own cost so it is these items which are allocated the landed costs.

Why is are estimated and actual landed cost values different?

There are various reasons why these values could be different, they are all explained in detail in the Understanding estimated, actual & invoiced landed costs section above.